Advanced Delivery and Chemical Systems Nevada, Inc. - Page 6

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          mid-1990s, a common form of business reorganization utilized by             
          corporations to eliminate or to reduce substantially the 4.5-               
          percent Texas corporate franchise tax on business income.  See              
          Tex. Tax Code Ann. sec. 171.001(a)(1), (b)(3) (West 2002)                   
          (imposing the Texas franchise tax on various business entities,             
          but not on partnerships).                                                   
               The six specific steps in ADCS’ reorganization, all                    
          occurring between January 18 and January 22, 1996, are reflected            
          below:                                                                      

               1.   ADCS-Limited was formed as a Texas limited                        
                    partnership;                                                      
               2.   Advanced Delivery & Chemical Systems Holdings LLC                 
                    (Holdings LLC), was formed as a Delaware limited                  
                    liability company to be taxed as a partnership.                   
                    ADCS owned a 99-percent membership interest in                    
                    Holdings LLC.  The individual shareholders of ADCS                
                    owned the remaining 1-percent membership interest                 
                    in Holdings LLC;                                                  
               3.   Advanced Delivery & Chemical Systems Operating,                   
                    LLC (Operating LLC) was formed as a Delaware                      
                    limited liability company to be taxed as a                        
                    partnership.  ADCS owned a 99-percent membership                  
                    interest in Operating LLC;                                        
               4.   Advanced Delivery & Chemical Systems Manager, Inc.                
                    (ADCS-Manager) was formed as a Delaware                           
                    corporation owned 100 percent by the individual                   
                    shareholders of ADCS.  ADCS-Manager owned the                     
                    remaining 1-percent membership interest in                        
                    Operating LLC;                                                    
               5.   After the above entities were formed, 99 percent                  
                    of the operating assets of ADCS were transferred                  
                    to Holdings LLC, and the remaining 1 percent of                   
                    the operating assets of ADCS were transferred to                  
                    Operating LLC, except that (as stipulated by the                  





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Last modified: May 25, 2011